Eurozone and Ccctb

EUROZONE AND CCCTB

INTRODUCTION

The European Union is going through a crisis that stems from its internal still fragmented

nature. Despite the common monetary policy, economic and political integration are far

from being obtained, and the difficulty to find consensus among partners, lest a common

policy, shows the struggles Eurozone is facing to reach harmonization on the one hand

and the legitimate desire for self determination of state members on the other. Each

sovereign state adopts its own regulations enforced by often-inefficient European

institutions on a variety of issues. In the current international scenario, dominated by

superpowers such as the US and China, individual nations are destined to lose their

power. The only way for Europe to be a strong player in the global setting is to increase its

strength as a Single Market through common economic, fiscal and budgetary instruments.

This essay examines common corporate taxation as an example of the issues faced by

Eurozone to pursue Europe’s internal unification. After describing the crisis Europe is

facing, the paper analyses in specific the problem of the opportunistic behaviour of big

corporations in their location strategies as an example of the difficulty of harmonising

economic and political decisions. CCCTB is presented as a possible solution to Europe’s

fragmentation and a way to strengthen the single market’s unity, and a discussion follows

on the difficulties of its implementation and the role of the Eurozone.

THE EUROCRISIS AND EUROPEAN FRAGMENTATION

The European Union is experiencing an existential crisis (Piketty, 2014). Every election in

Europe shows evidence that public opinion has lost faith in the Union, and eurosceptics

and independent movements are flourishing, challenging a complex architecture put in

place in times of peace and prosperity. The prolonged economic crisis has made the

problem more evident, as each state needs to address increasingly conflicting

stakeholders and the union has to address extremely complex humanitarian, social and

economic problems. This mainly involves the Eurozone countries, which are mired in a

climate of distrust and a debt crisis that is far from over: unemployment persists and

deflation threatens (Piketty,2014).

In spite of an overall agreement on several BCE

decisions, monetary decisions alone are insufficient to boost trust, and the eco-political

pillars of European integration are weak.

In the presence of very shaky consensus at home, European States have difficulty in

agreeing on some evident problems; the result is that Europe's existing institutions are

increasingly dysfunctional, decision making processes long and largely inefficient and

Eurozone members are easy prey for financial market speculators, given the financial

structure of some of them. Therefore, while competing with the US and other big

economies for resources and talent, European countries still face an internal competition,

and the presence of a single currency and the boundaries they impose weaken the ability

of each member state to contrast speculative moves. The Eurozone countries have

chosen to share their monetary sovereignty, and hence give up the weapon of unilateral

devaluation, but without developing new common economic, fiscal and budgetary instruments (Piketty,2014).

Of particular interest for the purpose of this paper is the very diverse structure of corporate

tax: big global companies are clearly negotiating from a position of relatively high

bargaining power for resources and concessions with states, further reducing the

sovereignty power of individual European countries who – at the same time - voluntarily

self disciplined vis-a-vis Europe. The magnitude of interests involved (from employment to

tax revenues to economic impact) makes single states resistant to a common policy; this

has three negative effects for European Union:

-­‐ Multinationals enjoy free riding

-­‐ Internal consensus is diminished

-­‐ The EU itself sees its reputation mined

The ability of the EU to regain control of, and effectively regulate 21st century globalised

financial capitalism would be an important eco-political result and would help reduce the

criticisms on Europe to burden themselves on trivial issues but ineffective on important

ones.

THE PROBLEM: TAXATION DISCREPANCIES LEADING TOWARDS THE SINGLE MARKET FRAGMENTATION

Tax Havens in Europe

A tax haven is a country that cuts deals with foreign companies, levying minimal or no

taxes (Dhammika Dharmapala, 2009); as tax rates on income or property are significantly

lower than in other countries, foreign companies are attracted to that specific country

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